GBP/USD continues to make gains, and crossed above the 1.55 line in Tuesday’s North American session. This level has seen a lot of activity since the start of the week, as the pound looks to post more gains against the US dollar. The pound has enjoyed a strong rally, gaining around three cents against the US dollar in the past week. In economic news, the US has started the week on the right foot, as Pending House Sales beat the forecast. There was more good news on Tuesday, as CB Consumer Confidence shot higher, easily beating the forecast. In the UK, Net Lending to Individuals came in at 0.9 billion pounds, matching the forecast.
There was finally some good news out of the US, as Pending Home Sales beat expectations on Monday. The key housing indicator bounced back from a decline last week, and posted a gain of 1.5%. The estimate stood at 1.1%. On Tuesday CB Consumer Confidence jumped from 59.7 points to 68.1 points, blowing past the estimate of 61.4 points. However, Chicago PMI looked weak, falling below the 50-point level to 49.0 points. The estimate stood at 52.5 points. The markets were pleased with the solid housing and consumer confidence numbers after Friday’s disappointing GDP release. However, with a string of weak releases dating back to March, the US will have to post more positive numbers to renew confidence in the US economy.
In the Eurozone, after weeks of political deadlock, Italy has finally formed a government. The impasse, which had paralyzed the Eurozone’s third largest economy and had kept the markets jittery, was broken as Enrico Letta was nominated as prime minister last week. Letta’s Democratic Party does not have a parliamentary majority, so the coalition he has cobbled together may not last for long. Letta is considered a moderate and is liked within the Eurozone. The new government will be faced with an economy mired in recession and a sour electorate that is fed up with austerity measures. However, the markets were pleased that there is finally a government in place. There was some good economic news for Italy this week, as bond prices dropped and the unemployment rate receded slightly. Further positive economic news from Italy would be bullish for the euro.
Will we see a rate cut from the ECB later this week? The Eurozone continues to stagnate with poor releases, and has its hands full with crises in Cyprus (bailout fiasco) and Italy (political gridlock). Speculation that the ECB will take action is growing. Goldman Sachs released a statement on Thursday, stating that it expects a 0.25% cut when the ECB meets this week. The prestigious firm also downgraded Eurozone growth for 2013, from -0.5% to -0.7%. The ECB will set rates on Thursday, but the possibility of a rate cut will likely to preoccupy the markets during the course of the week.
GBP/USD for Tuesday, April 30, 2013
GBP/USD April 30 at 14:15 GMT
1.5523 H: 1.5526 L: 1.5470
The pound continues to push upwards against the US dollar and has again crossed above the 1.55 line. The pair is testing the 1.5524. We could see this line fall if the pound’s upward momentum continues. There is stronger resistance at 1.5630. On the downside, 1.5432 is providing support. This line has strengthened as the pair trades at higher levels. The next support line is 1.5309, protecting the 1.53 level.
- Current range: 1.5432 to 1.5524
Further levels in both directions:
- Below: 1.5432, 1.5309, 1.5203 and 1.5138
- Above: 1.5524, 1.5630, 1.5695 and 1.5773
OANDA’s Open Positions Ratios
The GBP/USD ratio continues to show movement towards short positions. This is not reflected in the current movement of the pair, as the pound continues to move higher. However, the activity in the ratio could be an early indication that we will see the pair move lower.
The pound has had the dollar’s number over the past week, and has reached levels that have not been seen since February. Will the upward momentum continue? Much will depend on British PMIs, which will be released starting on Wednesday. If these key releases meet expectations, we could see the pound continue to post gains against the US dollar.
- 8:30 British Net Lending to Individuals. Estimate 0.9B. Actual 0.9B.
- 8:30 British M4 Money Supply. Estimate 0.4%. Actual -0.9.
- 8:30 British Mortgage Approvals. Estimate 53K. Actual 54K.
- 12:30 US Employment Cost Index. Estimate 0.5%. Actual 0.3%.
- 13:00 US S&P/CS Composite-20 HPI. Estimate 9.1%. Actual 9.3%.
- 13:45 US Chicago PMI. Estimate 52.5 points. Actual 49.0 points.
- 14:00 US CB Consumer Confidence. Estimate 61.4 points. Actual 68.1 points.
*Key releases are highlighted in bold
*All release times are GMT